Tag: Dividend Tax

With the introduction of the new dividends tax on 1 April 2012, the distinction between cash dividends and dividends in specie requires consideration. Where a company declares and pays a dividend and that dividend consists of a distribution of an asset in specie, the amount of the dividend is dee

The issue has often arisen as to whether the payment of a dividend that results in the creation of negative reserves can still be said to be a dividend or whether it is effectively funded from the share capital of a company. For instance, a company can have 100 as equity that is reflected as 100 in assets. However, the company then declares a dividend that results in it effectively having negative reserves of 100 in circumstances where the assets of 100 are used to fund the dividend.

The issue pertaining to whether a trust is liable for dividends tax should a company pay a dividend to the trust as the registered owner of the shares has recently been clarified by SARS. By way of background, dividends tax must be paid by the beneficial owner, the concept being defined as the person that is entitled to the benefit of the dividend attaching to a share.

Draft legislation confirming transition from STC to dividends tax released IN the 2012 Budget Speech delivered by Minister of Finance, Pravin Gordhan, on February 22, it was announced that the taxation of dividends will be increased from the current 10 percent secondary tax on companies (STC) to a 15 percent dividend withholding tax, with effect from April 1, 2012. Draft legislation confirming this proposal has now been released.

General Traditionally, two types of trust are recognised in our law, namely the bewind trust and the ownership trust. In the case of a bewind trust, the founder transfers ownership of the trust assets to the beneficiary, while the trustee is responsible for the administration of the trust assets. In the case of an ownership trust, the founder transfers ownership of the trust assets to the trustee and the rights of the beneficiary in respect of the trust assets are usually determined by the trust deed. Two subcategories of the ownership trust are recognised. Where the trustee may from time to time exercise his discretion in order to vest the trust assets (income or capital) in the beneficiary, the trust is referred to as a discretionary trust. Where the rights in respect of the trust assets automatically vest in the beneficiary (without the trustee having to exercise a discretion), the Read More …

Mr A is tax resident in the United Kingdom (UK). He owns some shares in X Pty Ltd, a private company incorporated and tax resident in South Africa (SA). On 15 April 2012, X Pty Ltd declares and pays a dividend in specie to its shareholders, including Mr A.

Companies and their shareholders have been anticipating the changeover from Secondary Tax on Companies (STC) to Dividends Tax for quite some time now, the effective date being 1 April 2012. There are various transitional aspects to consider.

Dividends are generally exempt from income tax, subject to the exceptions contained in s10(1)(k)(i) of the Income Tax Act, No 58 of 1962 (the Act). The Taxation Laws Amendment Act, No 24 of 2011 (the TLAA) introduced a new exception to the dividend exemption, namely ceded dividends.